Income Tax Modifications Effective for AY 2023–24 (FY 2022-23)

income tax

In the Financial Year 2022–23 (Assessment Year 2023–24), several significant changes made by the Finance Act of 2023 will be highlighted in this article. When submitting the Income Tax Return (ITR) for Assessment Year 2023–24, certain adjustments must be taken into consideration. The Agnipath plan’s Section 80CCH deduction, which is applicable to people who are enrolled in the plan and making contributions to the Agniveer Corpus Fund, is one such change. The deduction will be given for both private and public contributions, and it will not be factored into Agniveer’s total income calculation.

  • Individuals under the New Tax Regime will receive a deduction of government contribution to Agnipath Scheme
  • Central Government’s contribution to Agniveer Corpus Fund will be considered as individual’s salary
  • Amount received by Agniveer or their nominee from Agniveer Corpus Fund will be exempted under Sec 10(12C)
  • Co-operative societies registered under Co-operative Societies Act, 1912 have an increased threshold under Sec 194N
  • Sec 194N requires tax deduction by banking companies, co-operative societies, or post offices
  • Tax rate for Sec 194N is 2% for sums exceeding Rs. 1 crore
  • Non-filers subject to tax deductions at 2% (for sums exceeding Rs. 20 lakhs to Rs. 1 crore) and 5% (for sums exceeding Rs. 1 crore).

New Taxation Regime:

  • Individuals under New Taxation Regime receive a deduction for government contribution to Agnipath Scheme (sub-section (2) of Sec 80CCH)
  • Central Government’s contribution to Agniveer Corpus Fund considered as individual’s salary
  • Sec 10(12C) exempts any amount received by Agniveer or their nominee from the Agniveer Corpus Fund

Increased Threshold for Co-Operative Society:

  • Increased threshold u/s 194N for tax deduction applies to co-operative societies
  • Tax rate of 2% and threshold of Rs. 1 crore
  • Non-filers subject to tax deductions at 2% (for sums exceeding Rs. 20 lakhs to Rs. 1 crore) and 5% (for sums exceeding Rs. 1 crore)

Relaxation u/s 269SS & 269ST for PACS & PCARD:

  • PACS & PCARD can accept loans or deposits up to Rs. 1,90,000 without penalty
  • Limit u/s 269SS & 269T increased to Rs. 2 lakhs for PACS & PCARD
  • Sec 269SS & 269T provisions don’t apply to Government Banking Co., post office saving bank, or co-operative bank, among others

Summary: Recent tax regulation changes in India include a deduction for individuals under the New Taxation Regime, an increased threshold for tax deduction for co-operative societies, and relaxation of rules for PACS and PCARD.

Relief for eligible start-ups in carrying forward and setting off losses: Section 79 of the Income Tax Act deals with carrying forward and setting off losses. It restricts the setting off of carried forward losses for companies where public shareholding is less than 51%, except for eligible start-ups.

  • Under the current provision, eligible start-ups can carry forward and set off losses for seven years from the year of incorporation.
  • Section 80-IAC provides a deduction of 100% of profits and gains derived from eligible business for three consecutive years out of ten years from the year of incorporation.
  • To align the period of both sections, the government has proposed to increase the time period for loss of eligible start-ups from seven to ten years.
  • Therefore, the carried forward loss of eligible start-ups will be considered for set off if such loss is incurred within ten years from the year of incorporation.

Relaxation in the definition of eligible start-ups referred to in section 80-IAC: Section 80-IAC of the Income Tax Act provides a deduction of 100% of profits and gains derived from eligible business for three consecutive years out of ten years from the year of incorporation.

  • An eligible start-up is a company or limited liability partnership engaged in eligible business with a turnover of up to Rs. 100 crore and a certificate of eligible business from the Inter-Ministerial Board of Certification.
  • To promote the development of start-up businesses in India, the government has extended the incorporation date for eligible start-ups from April 1, 2023, to April 1, 2024.

Relaxation to International Financial Service Centre:The International Financial Service Centre (IFSC) is a multi-service Special Economic Zone in Gift City, Gujarat. It is India’s first offshore financial center and currently has more than 125 licensed financial entities.

  • The government has allowed banking, insurance, and capital markets to set up an IFSC unit. International Financial Centers (IFCs) are financial centers that serve consumers from countries other than their own. The government has provided relaxation to IFSCs to boost their growth and development.

The International Financial Services Centre (IFSC) has various concessions and benefits available to it, including a concessional rate of tax on capital gains from the transfer of specified securities, no tax on dividend distribution to shareholders, and a reduced rate of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) at 9%.

  • Transfer of specified securities by a non-resident on a recognized stock exchange located in any IFSC is not regarded as a transfer under Section 47(viiab) Clause, and transfer by a shareholder, unit holder, or interest holder in a relocation of a capital asset being a share or unit held by him in the original fund to the resultant fund shall not be considered as transfer under Section 47(viiad), extended to March 31, 2025.
  • The IFSCA (Fund Management) Regulations, 2022 came into effect on May 19, 2022, and the Income Tax Act will be amended to incorporate the amended definitions of “Specified Fund,” “Resultant Fund,” and “Investment Fund.”
  • Income received from a business trust referred to in Section 115UA of the Income Tax Act is included in Section 197 of the Income Tax Act, which allows a person to apply for a lower deduction or non-deduction of tax.
  • The exemption from TDS on payment of interest on listed debentures to residents under Clause (ix) of the proviso to Section 193 of the Act has been removed.
  • The IFSC enjoys several concessions and benefits, including tax-related concessions, transfer-related exemptions, and regulations related to fund management.

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